CREDIT RATING agency Moody’s is predicting an acceleration in regional economic growth this year and in 2016.
And the Caribbean has its “recovering” tourism industry and “sustained low oil prices” to thank for the improved outlook, although there remains concern about high debt.
Moody’s gave the forecast in a new report titled Sovereign Outlook Caribbean: Sovereign Credit Quality Supported By Recovery In Tourism, Low Oil Prices.
“Although the rebound in tourism will help all Caribbean nations that rely on this industry, the individual credit effects will reflect each country’s dependence on this industry,” said Gabriel Torres, Moody’s vice-president and senior credit officer.
According to Moody’s the boost from tourism and low oil prices would help the credit quality of the sovereigns in the region stabilise following negative pressure in 2014.
It noted that median growth in the Caribbean was 1.5 per cent last year and said it expected this to increase to two per cent this year. Moody’s also said regional government debt, which rose following the financial crisis, was slowly stabilising or in some cases declining, putting average sovereign debt metrics on par with those in Latin America.
It pointed out that debt ratios were stabilising in Belize, The Bahamas, the Dominican Republic, Cuba, Bermuda, St Maarten, and Trinidad and Tobago, while debt pressurs were increasing in Barbados and St Vincent and the Grenadines. Debt issues were also said to be easing in the Cayman Islands.
Moody’s said the overall stabilisation in debt levels in the region would help support current rating levels over the next year and a half.
The pickup in the tourism industry, it added, was a credit positive for The Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Jamaica, St. Maarten, St Vincent the Grenadines “because their economies depend heavily on tourism”.
“The tourism recovery largely reflects improving economic conditions in the [United States] and will continue to depend on the strength of the recoveries in the US and the [United Kingdom] through 2016. Barbados, Belize, The Bahamas, and St Maarten are most dependent on tourism,” it said.
Moody’s also noted that “lower oil prices have also helped spur tourist growth, with fuel costs for airlines dropping significantly in 2014 and expected to continue their decline in 2015”. (SC)
